Insurtech Industry Overview

By Paola Brignoni

Insurtech is transforming the insurance industry from customer acquisition, risk assessment, and fraud prevention to coverage customizations, product delivery, and claims processing. Some Insurtech companies are transforming the existing operations within traditional insurance companies to increase efficiencies and streamline processes, while others are introducing new ways to deliver insurance. Insurtech startups are placing a focus on its customers by offering ultra-customized policies, leveraging new streams of data to price premiums, allowing for in-app management of services/products, and offering on-demand quotes, all made possible with big data, artificial intelligence (AI), smartphones, wearables, and Internet of Things (IoT). Although traditional insurance firms have been slower to adopt these emerging technologies because of high switching costs, they are beginning to understand the value of Insurtech, particularly due to increased competition and amplified customer expectations.

Over the past decade, the insurance landscape has changed dramatically. There are around 3,400 Insurtech companies globally, and these firms are expected to continue disrupting the insurance industry. Over 1,500 Insurtech companies have emerged in the last five years, and according to MarketWatch, the global Insurtech market size is projected to reach $11.9B by 2027, at a CAGR of 34.4% from 2021 to 2027.

During the first six months of 2021, global Insurtech startups raised $7.4B, surpassing the $7.1B raised for all of 2020. While overall deal activity grew 11% quarter-over-quarter, the funding flow was mostly driven by mega rounds (deals of more than $100M). Venture deal activity for early-stage startups increased by 9%, 6% for Series B, and 24% for Series C. Startups focused on driving efficiencies in insurance distribution was (and will continue to be) a major priority for investors, where more than half of the deals closed in Q2 of 2021 involved distribution-focused startups (followed by health and life insurance).

Although 44% of all Insurtech companies in the world are based in the United States, geographic expansion has continued to grow, with venture deals spanning across 35 countries in Q2 of 2021, compared to 26 countries in Q1 of 2021.

Overall, deal value, deal count, and exit value achieved quarter record highs in Q2 of 2021, and the expectation is that deal and exit activity in Insurtech will continue to experience exponential growth through the rest of the year.

Insurtech VC Activity & Ecosystem

Insurtech is an established industry with hundreds of companies in operations globally. The company with the most VC funding raised to date is Suning Finance (a Chinese-based company worth $1.8B), followed by 3 American companies: Oscar Health ($1.6B), Bright Health ($1.5B), and Clover Health ($925M). Global investment activity in Insurtech has risen dramatically in the past years, with VC investors backing more and more deals each year.

As of July 2021, the top Insurtech VC Investors were:

• 500 Startups (25 deals)
• Anthemis Group (21 deals)
• Munich RE Ventures (19 deals)
• MS&AD Ventures (18 deals)
• Insurtech Gateway (17 deals)
• General Catalyst (16 deals).

Acquisitions have ramped up in Insurtech with as many as 81 companies being acquired in 2020 (highest number on record). The first half of 2021 also experienced a record exit value at $22.2B, with 8 exists in Q2 of 2021. Some of the top strategic acquirers include Arthur J. Gallagher & Co (7 deals), Insurity (5 deals), Applied Systems (5 deals), Majesco (4 deals), Hub International (4 deals), and Zywave (4 deals).

In Q2 of 2021, Insurtech companies globally raised $4.5B across 160 deals — which translated to a 110% quarter-over-quarter increase in terms of deal value. Insurance distribution and intermediaries drove most of the quarter’s deal value, with the following companies:

• Wefox — German-based digital insurer focused on personal insurance products, like household, motor, and personal liability insurance. It has raised $650M in Series C funding led by Target Global, reaching a pre-money valuation of $2.35
• Collective Health — Cloud-based self-insurance platform offering integrated administration of health plans through a single portal. It raised $280M in Series F funding, led by Health Care Services Corporation, reaching a pre-money valuation of $1.25B.
• Extend — Product protection services provider intended to offer personalized warranty plans for consumer durables, including electronics, appliances, sports and finance equipment, auto parts, and furniture. The company raised $260M in Series C funding led by SoftBank Investment Advisers, reaching a pre-money valuation of $1.34B.
• The Zebra — Car insurance comparison platform designed to help drivers shop for the most-affordable car insurance. It raised $150M in Series D funding from Kock Disruptive Technologies, Weatherford Capital, and Silverton Partners, reaching a pre-money valuation of $172M.

As technology innovations (e.g., machine learning, blockchain, IoT, etc.) and demand for digitization in the insurance industry continue to grow, so will the global Insurtech market. Digital innovation will continue to pose a risk to traditional insurance businesses, which will be forced to adapt or will inevitably lose market share to growing Insurtech players.

By Paola Brignoni, Member of the Rebel One Investor Network